Implications of GST On Delivered Cost of Renewable Energy

Implications of GST on
delivered cost of renewable

energy
Ministry of New and Renewable

Energy
Glossary
S.No. Abbreviation Meaning
1 ACD Additional Duty of Customs (levied in lieu of
excise duty)
2 BCD Basic Customs Duty
3 CERC Central Electricity Regulatory Commission
4 CGST Central Goods and Services Tax
5 COG Cost of goods
6 CST Central Sales Tax
7 GST Goods and Services Tax
8 GTA Goods Transport Agencies
9 GST Bill Constitutional (One Hundred and Twenty
Second Amendment Bill) 2014
10 IGST Integrated Goods and Services Tax
11 MNRE Ministry of New and Renewable Energy
12 O&M Operation and maintenance
13 OMC Oil Marketing Company
14 SAD Special Additional Duty of Customs
15 SGST State Goods and Services Tax
16 VAT Value Added Tax
2016 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, refers to PricewaterhouseCoopers Private Limited
(a limited liability company in India), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which
is a separate legal entity.\\
Rating criteria
Impact Meaning
Positive Impact Signifies positive impact under

GST as compared to current
tax regime
Negative Impact Signifies negative impact under

GST as compared to current
tax regime
Neutral Signifies no substantial change

in GST as compared to current
tax regime
Table of contents
1. Executive summary
2. Overview of current regime
3. Overview of GST
4. Assumptions
5. Methodology
6. Impact of GST on various segments of renewable energy sector
7. Key issues and recommendations
8. Scope limitations
Executive summary
Multiple Indirect taxes are currently levied on transactions in India. Some of the taxes are levied and
collected by the Central Government, while other taxes are collected by the State Governments.
Accordingly, the current Indirect tax regime is beset by myriad problems such as complexity, tax on
tax and lack of credit fungibility.
Considering the issues plaguing the current Indirect tax regime, India is gearing up to introduce a
comprehensive Indirect tax regime under GST. All existing Indirect taxes, barring a select few, would
be subsumed into the new GST.
Taxes on consumption or sale of electricity have been proposed to be kept outside GST. In such case,
the electricity generated by renewable sources would continue to be outside the GST regime.
However, taxes on various capital goods, inputs and input services (both forming part of capital cost
as well as operation & maintenance costs) used for generation of renewable energy should be
subsumed in the GST regime. Taxes paid on procurements would continue to be non-creditable for
the energy sector and hence, forming part of costs. Accordingly, any impact of taxes paid on
procurements used in renewable energy sector would have a direct impact on cost of renewable
energy Basis information available in the public domain on levy of GST, it appears that taxes on
procurements for renewable energy sector would go up, which would lead to increase in cost of
renewable energy (resulting in negative impact for the sector).
Further, it is imperative to note that the adverse impact of tax cost would vary from project to project
(as well as from one source of renewable energy to another) based on the procurement pattern
(import vs. domestic purchase) as well as extent of exemptions available currently.
Based on the exercise undertaken, the summary of impact on various types of renewable energy
projects is provided below
Source of renewable % range of increase in Levelised Tariff/ cost Impact

energy of setting up and operations (as applicable)
Solar PV GRID 12% - 16%
Solar off GRID 16%-20%
Wind energy projects 11% - 15%
Wind solar hybrid projects 11%-17%
Bio Mass projects 11% - 14%
Bio Mass gasifier projects 11%-14%
Small Hydro projects 1% - 11%
For the bio-fuel sector also, there would be a substantial increase in prices of inputs as well as bio-
fuels itself due to pruning of exemptions, removal of statutory forms and increase in rate. Further,
any GST charged on bio-fuels would become a cost to the OMCs (as petrol and diesel would be
outside GST unless otherwise notified).
The key factors resulting in an adverse impact on cost of renewable energy are as under:
S.No. Key factor Comments

1 Removal of exemptions Various exemptions are provided currently to capital goods
and inputs used in renewable energy projects.
The foundation of GST is based on pruning of exemptions as

far as possible.
Hence, if exemptions are pruned for goods used in renewable

energy projects, there would be a significant increase in tax
cost on procurements.
Since all such taxes are (and would continue to be) non-
creditable for renewable energy players, the same would be a
cost and hence, increase cost of renewable energy.
2 Increase in tax rates Currently, different tax rates are applicable depending on the
nature of procurement. GST aims to provide a single rate for
goods and services. The Select Committee has recommended
that the standard GST rate should not exceed 20%.
A GST rate of 20% would also be substantially higher than

the rates currently applicable on procurement of goods and
services in the renewable energy sector
This would have an adverse impact as the taxes paid on

procurements would increase the tax cost burden for the
renewable energy sector.
3 Removal of statutory In case of inter-State purchases, a concessional rate of CST of
forms 2% is provided against issuance of statutory form (Form C) in
case the goods are to be used in generation or distribution of
electricity.
GST is expected to be levied on all inter-State supplies, with

availability of credit in destination States. It is likely that
statutory forms (eg Form C) would be done away with under
the GST regime. Hence, concessional rate of tax may not be
available even if the goods are to be used in generation of
distribution of electricity.
IGST at 20% would be applicable on inter-State

procurements along with an additional tax of 1%. This would
lead to a substantial increase in tax costs as compared to the
current regime having a direct impact the cost of renewable
energy.
In line with the Governments initiatives of boosting the renewable energy sector, the following key
recommendations should be kept in mind
Exemptions provided to goods used in renewable energy

sector should continue/ if GST levied, it should be NIL rated
with the elibility for the vendor to avail credit of GST on their
inputs and input services
Wherever, exemption is not granted, a concessional rate of

GST should be applicable on both goods and services used
for setting up of and operating the renewable power project
The renewable energy developer/ operator should be eligible

to take refund of taxes paid (on goods and services used for
setting up and operating renewable power project)
considering that electricity would be outside GST
Uniform SGST rate across States on captial goods, inputs

and inputs services meant for renewable energy projects
Further, the following recommendations should be kept in mind for the bio-fuel sector:
Exemptions Wherever,
exemption is Refund of
provided to OMC should be
not granted, a unutilized
goods used in eligible to take
concessional credits should
bio-fuel refund of taxes Uniform rate
rate of GST be available to
production as paid on bio- should be
should be bio-diesel
well as on bio- fuelsconsiderin maintained
applicable on manufacturers
diesel itself g that petrol/ across States
both goods and in case of
should diesel would be
continue and services used in inverted duty
outside GST
bio-fuel sector structure
be zero rated
as well as on
bio-fuel itself
Overview of current regime
Various Indirect Taxes are levied currently by the State Government as well as Central Government
on different transactions. A brief overview of the current Indirect tax environment is provided below
for ease of reference:
Particulars Taxing authority Applicable on General effective rate
Customs Duty : Central Government Import of goods from Peak rate 29.44%%.
outside India Capital goods generally
BCD 7.5% or
attract duty at peak rate
10% of 26.69%. Exact rates
ACD 12.5% depend on nature of
Cess 3% goods and end use
SAD- 4%
Excise duty Central Government Manufacture of goods in Peak rate is 12.5%. Exact
India rate depends upon
nature of goods and end
use
VAT State Government Sale of goods within the Varies from State to
state State; generally ranges
between 5% -15%
CST Central Government Inter-state sale of goods Rate is equal to VAT rate
of displacing State else
2% against Form C
(which is also available
for goods procured for
generation of electricity)
Service tax Central Government Provision of services Generic rate is 14.5%
Entry tax/Octroi State Governments Entry of goods into a local Varies from State to State
area for consumption/sale ranging between 1% -
14%
Research & Central Government Import of technology into 5%

Development Cess India under foreign
collaboration
There are exemptions granted under aforesaid laws (specifically for capital goods and inputs) used
for setting up renewable energy devices. The same have been discussed subsequently in the report.
Overview of GST
1. Overview of GST
The current Indirect tax regime in India provides for a complex tax environment due to multiplicity
of taxes, elaborate compliance obligations and tax cascading. To address such problems, a
comprehensive consumption tax levied on the supply of all goods and services has been proposed
which is known as GST. GST would subsume majority of Indirect taxes, thus, eliminating need for
different Indirect tax legislations. Further,
GST aims at providing a seamless credit
chain by providing for cross utilization of
credits (inter se goods and services) and Simpler and
standard IT
minimal credit restrictions. GST is being enabled
touted as the single biggest Indirect Tax compliances
reform in India and aims at bringing a
fundamental shift in the way business
transactions are taxed in India Simpler and
rational tax
The motto of the GST regime seems to be structure
One Tax One Market which aims at
providing a cohesive tax approach across
India.
Fungibility of
Besides simplifying the current system and credits
lowering the costs of doing business, GST
will call for a fundamental re-design of
supply chains.
It will affect how companies operate their businesses, making GST not just a tax reform but an overall
business reform.
Given that India is a federal administrative structure with the Central Government existing alongside
respective State Governments, GST in India must be commensurate with this governance structure.
Accordingly, the dual GST model has been proposed. Under this model, the following taxes are
chargeable on supply of goods and services:
On within the state transactions - CGST (To be collected by the Central Government) and SGST
(To be collected by the State Government)
On interstate transaction
Sale of goods transactions: IGST - To be collected by the Central Government and additional
1%: To be collected by the origin state (applicable for a period of 2 years
Supply including provision of services (other than sale of goods transaction) - IGST
On import of goods - BCD and IGST
On import of services - IGST
Recent momentum of changes and progress reflects Governments intention to introduce GST at the
earliest.
Provided below is a diagrammatic representation of the steps current state of play and steps required
for implementation of GST:
Constitution Amendment Bill
Bill to be ratified by
Legislatures in half of the States
Constitutional Amendment Process for

Bill passed in Lok Sabha on passing of
6 May 2015 Constitutional
Bill to be presented to Amendment
President for assent Bill in the
Parliament
Bill referred to Select Committee of Rajya Sabha and report

submitted by Committee Bill to be taken up in Rajya Sabha and
passed by 2/3rd members of the house present and voting
GST Bill Process for

State legislature to pass State enactment of
specific GST legislation based
on draft GST law prepared by
GST laws
Empowered Committee
Draft reports
on
Registration,
Refund,
Finalization of Payment of tax
draft GST Bill Implementation of GST
and Returns
have already
been released
by Department
of Revenue for
public
CGST Bill to be passed by both houses of the comments
Parliament by simple majority To be
GST council to be created presented to President for assent
Impact on GST on renewable energy sector
The power to legislate is engrafted under Article 246 of the Constitution of India and the various
entries in the three lists of the Seventh Schedule are the fields of legislation which provide power to
the Central and State Government to govern various matters.
To enable levy of GST (which would be under a dual structure), various entries of the Constitution of
India are proposed to be amended1/ modified and accordingly, various articles as well as entries of
the Seventh Schedule are being subsumed and replaced by Articles enabling the GST implementation.
The power to levy taxes on consumption or sale of electricity has been provided to the State
Government vide entry 53 of List II of Seventh Schedule of Constitution. However, such entry is not
being subsumed and accordingly taxes on consumption or sale of electricity have been proposed to be
kept outside GST. Therefore, the electricity generated by renewable sources would continue to be
outside the GST regime and the State Government would have the power to continue to tax the same.
However, Entry 54 which empowers the States to levy tax on sale of goods has been subsumed as part
of GST. The term goods has been defined in the Constitution as goods include all materials,
commodities, and articles. Given the wide definition of the term goods, it may be argued that
electricity qualifies as good. This is also supported by judicial precedents and the fact that in various
State VAT laws, electricity has been included in the category of exempted goods. Also, electricity has
been mentioned in the Excise Tariff. In light of the discussions, it is possible to consider electricity as
goods and accordingly, technically possible to tax electricity under GST (as sale of goods).
Currently, tax on electricity is levied only under Entry 53 and its specifically exempted/ excluded
from levy under Entry 54.
It may be highlighted that for the purpose of this report has assumed that the same dispensation
would continue (ie States would continue to tax electricity as presently under Entry 53 as this Entry
has not been subsumed in GST) and that there would be no levy under GST on output electricity
although Entry 54 has been subsumed in GST.
1 Vide the Constitution (One Hundred and Twenty Second Amendment) Bill 2014
However, taxes on various inputs and input services (both capital cost as well as operation &
maintenance costs) used for generation of renewable energy would be subject to GST.
Taxes paid on
procurements used
for generation of
electricity would
continue to be non-
creditable Any Inputs and input
increase in their services (for
Taxes on electricity - tax costs would capital cost &
Outside GST increase costs for O&M) - Would
setting up power attract GST
projects
GST is based on the foundation of credit fungibility and reduction of exemptions. Considering the fact
that renewable energy sector currently benefits from various exemptions and concessional duty, the
impact on the delivered cost of renewable energy needs to be examined under the GST regime which
is likely to eliminate/ reduce exemptions.
Further, specified petroleum products (such as petroleum crude, high speed diesel, petrol, aviation
turbine fuel and natural gas). The outputs of the bio-fuel sector are also supplied as inputs to such
OMCs for blending. Any GST charged on bio-fuels would become a cost to the OMCs.
Provided below are assumptions and comments on how the delivered cost of renewable energy as
well as the impact on the bio-fuel sector could be impacted in the GST regime.
2. Assumptions
Since the GST law is yet not available in public domain, the current exercise has been undertaken
basis certain assumptions. For the purpose of this report, it has been considered the following
assumptions for analyzing impact of GST on renewable energy sector:
GST Model
The proposed model will be in the form of a Dual GST model comprising the following:
CGST levied by the Central Government

SGST - levied by the States Government
Inter-state and import transactions proposed to be covered under IGST to be levied by Central
Government (likely tax rate to be sum of CGST and SGST)
GST at the applicable rate would be levied on supply of all class of goods and services except those
which are exempted/ excluded from GST
Provider/ supplier/ seller of goods/ services would be liable to pay GST except in specified cases
(such as import of services, few other specified services as may be specified under law where the
recipient would be liable to deposit GST under reverse charge mechanism)
For the purpose of this report, States would continue to tax electricity as presently under Entry 53
of the State List. As under current Indirect tax regime, no GST would be levied on electricity
Petroleum products (petroleum crude, high speed diesel, motor spirit i.e. petrol, aviation turbine
fuel and natural gas) would be kept outside GT unless otherwise notified by the GST council
Provided below is summary of key taxes to be subsumed and to be kept outside the ambit of GST:
Taxes be subsumed Taxes kept outside of GST
Central levies BCD

- ACD Stamp duty
- SAD
- Central Excise Taxes and duties on electricity
- Service Tax Taxes and duties on alcohol for human
- CST consumption
- Central Surcharges and Cesses
related to supply of goods and
services
State levies
- State VAT
- Other state levies such as Luxury tax,
Octroi, Entry tax, Purchase Tax
Entertainment tax, etc
- State Surcharges and Cesses related
to supply of goods and services
- Medicinal and Toilet Preparations
(Excise Duties) Act, 1955
GST rate
Currently, there is no clarity on the rate of CGST, SGST and IGST. For the purpose of the
preparation of the report, the rate of taxes is proposed to be assumed as below :
SGST 10% (uniform across all states )

CGST 10%
IGST 20%2
Select Committee of Rajya Sabha also indicated that the standard GST rate should not be more
than 20%. Further, the Committee also recommended a concessional rate of GST of 14%. The
Chief Economic Advisor has recommended GST rates as under:
RNR has been computed at 15 - 15.5%

Standard rate: 17% - 18% - Rate dependent upon various factors including status of
exemptions, tax rate on precious metals
Lower rate: 12% - Applicable on essential goods. No specific recommendation for
essential services
Demerit rate: 40% - applicable on luxury cars, tobacco products
However, no information is available on the goods and services on which such reduced rate would
apply. Therefore, for the purpose of computing maximum possible impact under GST regime
(basis information currently available), the peak rate of 20% has been assumed for both goods
and services used for setting up renewable power project in this report.
The rate of tax on goods and services has been assumed to be the same ie 20% based on the
current information
Additional tax
Central Government will levy an additional tax not exceeding 1 % on inter-state supply of
goods for 2 years which would be non-creditable
No additional tax on stock transfers As per recommendation of the Select Committee,
additional tax be levied only on supplies for a consideration
Additional tax would be levied on each inter-State sale transaction
Imports
Imports would attract both BCD and IGST in lieu of the current additional duties/ cess of
Customs
BCD rate would remain the same as under current regime
IGST on imports to be computed on assessable value plus BCD amount
No additional tax would be levied on imports
Works contract transactions to be classified as services (whether classified as goods or service,

the rate is same and no credit is available for either)
Abatement on GTA services would continue at 70% and tax would be payable at balance 30% only
Others
2 Select Committee has also indicated that rate should not exceed 20% for general category and 14% for concessional rate
Generation of electricity and supply thereof would be exempt from GST
No exemption/ concessions will be available on supply/ procurement of renewal energy devices as
well as components/ parts of such devices under GST law
Similarly, no exemptions/ concessions will be available on services procured for setting up and
operating power project/ plant
Exemption/ concessions provided to bio-fuel sector as well as its inputs would be done away with
For the purpose of the report, assumptions on cost of generation of electricity (in respect of grid
projects) have been taken based on information available under the Tariff Orders issued by the
CERC
Assumptions as to structure for procurement of inputs/ components and services have been taken
basis mutual discussion with the stakeholders in the industry and MNRE
methodology
3. Methodology
Summarized below are the key steps followed for undertaking GST impact assessment:
Finalization of the list of projects for which impact assessment to be conducted basis information
available and discussions with MNRE
Identification of the key indicators (such as Levelised Tariff, Total COG etc.) for each project for
which impact is to be analyzed.
List of projects with key indicator and key source of information for computing the possible
impact has been tabulated below:
Key Source of
information on
S.No Project Key indicators mechanism of
computation of
Indicators
CERC order dated 31 March

1 Wind Projects Levelised Tariff 2015 (Annexure 1A)

2 Solar PV Projects Levelised Tariff 2015 (Annexure 5A)

Small Hydro 2015 (Annexure 2A and
3 Levelised Tariff
Projects Annexure 2C)
Total COG and CERC order dated 31 March

Biomass Power
4 applicable tariff (FY 2015 (Annexure 3.1A to 3.1H)
Projects
2015-16)
Total COG and CERC order dated 31 March
Biomass Gasifier
5 applicable tariff (FY 2015
Projects
2015-16)
Information received from
Wind Solar Hybrid Capital cost and Annual
6 developers
Projects maintenance charges
Information received from
Solar Off-grid Capital cost and Annual
7 MNRE
Projects maintenance charges
Understanding contribution of different factors (such as beak-up of capital cost, source of funds)
in computation of the above key indicators of cost of electricity. Following factors have an impact
under GST regime:
Capital Cost: One time cost for setting-up of the project;

Operation & Maintenance (O&M) charges: Annual charges for operation and
maintenance of plant; and
Others Cost of major input such as Biomass in respect of Biomass project
Computation of tax element in respect of different components of capital cost, O&M charges and
biomass cost, basis reasonable assumptions, under the current regime and proposed GST regime:
(i) Computation of impact on indirect tax costs in respect of capital cost under GST
regime - Methodology
Capital cost generally includes cost of plant and machinery, civil construction, erection services,
transportation services etc. As a first step, break-up capital cost for different project was
identified Basis discussions, finalizing assumption regarding pattern of procurements ie
whether components, plant and machinery or any other goods would be imported, procured on
inter-state basis or within the state
Apportion value of each component according to assumed source of procurement (imported,

within-state procurements or inter-state procurements)
Break-up of capital cost along with assumptions on source/ nature of procurement considered
for each type of project has been tabulated below:
Wind Projects
S.No Cost category Share in Source of procurement (Assumed)

capital
cost* (%) Import Within- Inter-state
state
1 Wind operated 69% 30% 35% 35%
electricity generator,
its components and
parts including rotor
and wind turbine
controller (Goods)
2 Transformer (Goods) 2% - 100% -
3 Transportation 5% - 50% 50%

(Services)
4 Other services 24% - 50% 50%
TOTAL 100%
[*Source for share in capital cost: Page 47 of Statement of Objects and Reasons CERC
(Terms and Conditions for Tariff determination from Renewable Energy Sources)
Regulations, 2012]
Solar PV Projects

capital
state
1 PV Modules (Goods) 55% 100% - -
2 Land cost (Assumed as 4% - 100% -

services)
3 Civil and General 8% - 50% 50%
Works- (Assumed only
installation services)
4 Mounting structures 8% - - 100%
(Goods)
capital
state
5 Power conditioning unit 7% - 100% -
(Goods)
6 Evacuation Cost up to 9% - 50% 50%
Inter-connection unit
(Cables and
Transformers) (Goods)
7 Preliminary and Pre- 8% - 50% 50%
operative expenses
including IDC and
contingency (Services)
TOTAL 100%
[*Source for share in capital cost: Page 18 of CERC order dated 31 March 2015
determination of Benchmark Capital Cost Norm for Solar PV power projects and Solar
Thermal power projects applicable during 2015-16]
Small Hydro Projects
S.No Cost category Share in Source of procurement (Basis

capital information received and
cost* (%) assumptions)
Import Within- Inter-state

state
1 Civil work (Goods 12% - 100% -
portion)- Cement
portion)- Steel
structural
portion)- Other goods
4 Civil work (Services) 20% - 100% -
5 Electrical- Turbine and 29% 27% 36.5% 36.5%

Generator (Goods)
6 T&D- Cable and 4.8% - 50% 50%
Transformers (Goods)
7 Land, administrative, 17.2% - 50% 50%
miscellaneous charges,
etc. (Services)
TOTAL 100%
[*Source: MNRE]
Biomass Power Projects

capital
state
1 Land and site 2.42% - 50% 50%
Development-
(Assumed Services)
2 Civil- (Cement) 3.58% - 100% -
3 Civil- (Steel structural) 2.69% - 100% -
4 Civil- (Others goods) 2.69% - 100% -
5 Civil- Services 5.97% - 100% -
6 Plant and machinery- 68.01% 30% 35% 35%

(Goods)
7 Miscellaneous Fixed 2.80% - 100% -
Assets (Goods)
8 Contingencies 11.84% - 50% 50%
TOTAL 100%
(*Source: Indian Renewable Energy Department Agency Limited and MNRE)
Biomass Gasifier Projects

capital
state
1 Plant and machinery 90% 30% 35% 35%
(Goods)
2 Erection, 10% - 50% 50%
Commissioning &
Training (Services)
TOTAL 100%
[*Source: Information received from Industry players]
Wind Solar Hybrid Projects

capital
state
capital
state
1 Wind solar hybrid 86% - 100% -
system (Goods)
2 Transportation 4% - 100% -
(Services)
3 Installation and 10% - 100% -
commission (Services)
TOTAL 100%
[*Source: Information received from Industry players and developers]
Solar Off-grid Projects

capital
state
1 Solar Panel (Goods) 30% 80% 20% -
2 Battery (Goods) 36% 30% 70% -
3 Power conditioning unit 19% 35% 65% -

(Good)
4 Structure (Goods) 4% - 100% -
5 Cable (Goods) 2% - 100% -
6 Monitoring systems 1% 35% 65% -

(Goods)
7 Installation cost 7% - 100% -
(Services)
TOTAL 100%
[*Source: MNRE]
Basis nature and source of procurement, mapping current indirect tax rates against each
component of capital costs
Computation of total indirect tax applicable under current regime for each component. Under
current regime, indirect taxes paid on procurements are non-creditable and hence, form part of
costs. Accordingly, it has been assumed that the above taxes (computed) have been included in
the respective capital costs.
Considering the same, the computed taxes have been reduced from the value of capital costs
to arrive at a tax exclusive value of capital cost;
Computation of taxes applicable under GST regime. For this purpose, GST rates (basis
assumptions mentioned in previous section) were applied on each relevant component of
capital costs
Comparison of indirect tax costs under current regime and the proposed GST regime
(ii) Computation of impact on indirect tax costs in respect of O&M charges under
GST regime - Methodology
Mapping of tax rates applicable on various components of O&M charged under current
regime.
Basis the same, computation of to compute O&M charges excluding taxes.
Map tax rates applicable under GST regime to calculate O&M charges (inclusive of taxes
under GST regime).
Comparison of indirect tax costs under current regime and the proposed GST regime.
(iii) Computation of biomass cost under GST regime
While for other types of renewable energy projects (ie solar, wind or hydro, generally there is no input
costs other than capital cost and O&M cost discussed above), in case of bio-mass project there is
additional cost of inputs ie biomass. Accordingly, in these projects cost of biomass also needs to be
computed under both current and GST regime as under
Map tax rates applicable under current regime to compute biomass cost excluding taxes. For
this purpose the rate of VAT on biomass related inputs has been considered at lower rate
under each of the relevant State VAT law. Please note that the same could vary depending on
the type of inputs being used.
Map tax rates applicable under GST regime to calculate biomass cost inclusive of taxes under
GST regime.
Comparison of indirect tax costs under current regime and the proposed GST regime
Additionally, to demonstrate the impact of state levy under current indirect tax regime as well
as GST, an exercise has been conducted considering the following relevant state for each type
of project:
Wind Solar PV Small Biomass Biomass Wind Solar Solar Off-

Hydro Power Gasifier hybrid grid
Tamil Nadu Tamil Nadu Tamil Nadu Tamil Nadu Tamil Nadu Tamil Nadu Tamil Nadu
Maharashtra Maharashtra Maharashtra Maharashtra Maharashtra Maharashtra Maharashtra
Gujarat Gujarat Andhra Andhra Andhra Gujarat Gujarat
Pradesh Pradesh Pradesh
Rajasthan Rajasthan Arunachal Karnataka Karnataka Rajasthan Rajasthan
Pradesh
Andhra Andhra Karnataka Punjab Punjab Andhra Andhra
Pradesh Pradesh Pradesh Pradesh
Telangana Telangana Sikkim Uttar Uttar Telangana Telangana
Pradesh Pradesh
Madhya Madhya Himachal Haryana Haryana Madhya Madhya
Pradesh Pradesh Pradesh Pradesh Pradesh
Kerala Karnataka Uttarakhand Chhattisgarh Chhattisgarh Kerala Karnataka
Punjab Punjab
Please note that the above States have been considered only to demonstrate different level of
impact on account of variation in current VAT applicability on different components procured for
setting up of power projects/ plants. The exercise has been undertaken using CERC order (for
determining levelised tariff) to ensure parity in comparison and have accordingly, not referred to
the State wise tariff orders.
GST impact only has been analyzed for the goods, services procured by the developer for setting
up of power plant/ project. As part of this study, impact of GST on vendors manufacturing goods
meant for supply to or rendering services to the project owner/ developer has not been examined.
Further, in relation to the bio-fuel sector, since the output is not electricity but various types of
bio-fuels, the impact of GST on the input and output in various States (Karnataka, Maharashtra,
Punjab, Tamil Nadu and Uttar Pradesh) has been compared.
Such input tax costs of manufacturers and other vendors have not been considered due to the
following:
Various Indirect tax benefits/ concessions provided to goods to be used in renewable

energy projects are also available to parts/ accessories etc which may be procured by
manufacturer/ supplier to be supplied to project owner. Hence, it would not be the case
that manufacturer/ supplier would be paying taxes on all their procurements and no
exemptions/ concessions would also be available to them. In such case, the contention
that GST impact would be only on the value addition of the manufacturer/ supplier may
not be technically correct as pruning of exemptions would impact the input cost of such
manufacturer/ supplier as well.
For various renewable energy projects (such as solar projects), a portion of capital goods
may be imported from outside India. For such imported supplies, no input taxes on their
parts would be payable in India. Accordingly, introduction of GST would not have an
impact of cost of manufacture of such imported supplies.
The purpose of exercise was to provide the maximum possible GST impact on various
renewable energy projects, so as to understand the possible GST implications and identify
key recommendations. Consideration of input taxes for manufacturers would only to a
certain extent reduce the possible GST impact and therefore, the same were not taken into
account at this stage.
4. Impact of GST on various segments
of renewable energy sector
As discussed above, GST impact on the following sources of renewable energy has been analyzed:
Solar PV
Wind
Biomass
Small Hydro
Solar Off-grid
Wind Solar Hybrid
Biomass Gasifier
Bio-fuel sector
It is expected that the exemptions/ concessions prescribed under various current indirect tax laws
would be pruned under GST regime. This would have a significant impact on the cost of renewable
energy. In order to compute the possible impact, it would be first important to analyze the
exemptions available under the current regime.
The following exemptions (provided by the Central as well as State Government) are applicable on
most of the renewable energy projects:
(i) BCD General exemptions/ concessions
The following exemptions/ concessions from BCD are available generally for goods/ equipment used
in various renewable energy plants:
Notification Entry Chapter Description of goods Concessional

heading rate
No. 12/2012- 369 84 or any All goods, for renovation or modernization 5%

Customs, other of a power generation plant (other than
dated 17 chapter captive power generation plant)
March 2012 510 9801 All goods (Project imports) 5%
(ii) SAD General exemptions
The following exemptions/ concessions from SAD are available generally:

heading rate
102/2007 NA Any When goods are imported into India for Refund of SAD
Customs dated chapter subsequent sale (on which VAT/ CST is
14 September paid, i.e. trading activity), SAD paid at the
2007 time of import is allowed as refund to the
importer.
(iii) Excise duty General exemptions
The following exemptions/ concessions from excise duty are available generally for goods/ equipment
used in various renewable energy plants:

heading rate
12/2012- 332 Any Non-conventional energy devices or Nil

Excise dated chapter systems specified in List 8
17 March 2012 332A Any Parts consumed within the factory of Nil
chapter production for the manufacture of goods
specified in List 8
List 8 includes:
(11) Solar photovoltaic module and panel

for water pumping and other applications
(13) Wind operated electricity generator,
its components and parts thereof including
rotor and wind turbine controller
336 Any All goods supplied against International Nil
chapter Competitive Bidding
(iv) VAT General exemptions/ concessions for renewable energy
S.No. State Description Rate Relevant

provision
1 Andhra Renewable energy devices and spare parts 5% Schedule IV
Pradesh Entry 53
2 Arunachal Renewable energy devices & spare parts 4% Schedule III
Pradesh Entry 59
3 Chhattisgarh Renewable energy devices and spare parts 5% Schedule II Part II
Entry 96
4 Gujarat Renewable energy devices and 5% Schedule II
components and parts thereof Entry 61
Section 7 (1A)
5 Haryana Renewable energy devices, components 5.25% Schedule C
and spare parts thereof Entry 75
6 Himachal Renewable energy devices and parts 5% Schedule A Part II
Pradesh thereof Entry 88
7 Jammu & Renewable energy devices and spare parts 5% Schedule C
Kashmir thereof Entry 113
8 Karnataka Renewable energy devices and parts 5.5% Third Schedule
thereof Entry 80
9 Kerala Renewable energy devices and spare 5% Schedule III
parts Entry 107
(1) Wind turbine/engine
(2) Parts of turbine/engine
(17) Wind mills and any special designed
devices which runs on wind mills
(18) Any special devices including electric
S.No. State Description Rate Relevant
provision
generators pumps running on wind
energy"
10 Madhya Renewable energy devices or equipment, 0% Schedule I
Pradesh including their parts, that is to say Entry 71
10. Solar power generating system
11. Solar photo-voltaic modules and
panels for water pumping and other
applications
12. Windmills and any specially designed
devices which run on windmills
13. Any special devices including
electricity generators and pumps running
on wind energy"
11 Maharashtra Renewable energy devices as may be 5% Schedule C
notified, from time to time, by the State Entry 82
Government in the Official Gazette and (Read with
spare parts thereof. Notification No. VAT-
-Wind mills and any specially designed 1505/CR-
services which run on wind mills. 119/Taxation 1 Dated
- Any special devices including electric 1st April, 2005)
generators and pumps running on wind
energy.
-Agricultural and municipal waste
conversion devices producing energy
12 Punjab Renewable energy devices and spare parts 6.05% Schedule B (Entry
94)
13 Rajasthan A) Solar energy equipment 0% Schedule I
B) Plant and Machinery including parts (Entry 107 & 135)
thereof, used in generation of Electricity,
from- (a) Solar Energy;(b) Wind Power: "
14 Sikkim Renewable energy devices & spare parts 4.5% Schedule III
Entry 61
15 Tamil Nadu Renewable energy devices and spare parts 5% First Schedule Part B
other than those specified in the Fourth Entry 117
Schedule
16 Telangana Renewable energy devices and spare parts 5% Schedule IV
Entry 53
17 Uttar Renewable Energy devices and spare 5% Schedule II
Pradesh parts which are not included in any other Entry 108
Schedule
18 Uttarakhand Renewable energy devices and equipment 0% Schedule I
generating or utilizing renewable sources Entry 49
of energy including those detailed below,
and their spare parts:
(v) CST General exemptions/ concessions for renewable energy sector
S.No. Description Rate Relevant provision

1 Goods purchased for use in the generation or 2% Section 8
distribution of electricity or any other form of power
when Form C is provide by buyer to vendor
6.1 Solar energy - Impact
To boost the solar energy industry, various exemptions have been provided by both Central as well as
State Government for setting up, operation as well as maintenance of solar energy sector.
Provided below is a summary of exemptions which are provided currently to the solar energy sector
(in addition to the general exemptions mentioned above which are available for various renewable
energy sectors which have been discussed earlier).
(i) BCD - Specific exemptions for solar plants
The following specific exemptions/ concessions from BCD are available for goods/ equipment used in
solar power plant:

heading rate
No. 01/2011- NA Any All items of machinery, including prime BCD - 5%

Customs, Chapter movers, instruments, apparatus and ACD Nil
dated 6 appliances, control gear and transmission
January 2011 equipment, and auxiliary equipment
(including those required for testing and
quality control) and components, required
for initial setting up of a solar power
generation or solar energy production
project or facility
No. 24 /2005- 3 8541 Covers tariff heading 8541 40 11 i.e. solar BCD - Nil
Customs,dated cells whether or not assembled in modules
1 March 2005 or panels
(ii) SAD - Specific exemptions for solar plants
The following specific exemptions/ concessions from SAD are available for goods/ equipment used in
solar power plant
Notification
Entry Chapter Description of goods Concessional
heading rate
No. 21/2012- 14 Any All items of machinery including prime Nil

Customs, Chapter movers, instruments, apparatus and
dated 17 appliances, control gear and transmission
March 2012 equipment and auxiliary equipment
quality control) and components required
for setting up of a solar power generation
or solar energy production project or
facility
(iii) Excise duty - Specific exemptions for solar plants
The following specific exemptions/ concessions from excise duty are available for goods/ equipment
used in solar power plant

heading rate
Notification NA Any All items of machinery, including prime Nil

no. 15/2010- chapter movers, instruments, apparatus and
CE dated 27 appliances, control gear and transmission
February 2010 equipment and auxiliary equipment
for initial setting up of a solar power
generation project or facility
(iv) VAT/ CST - Specific exemptions for solar plants
The following specific exemptions/ concessions from VAT/ CST are available for goods/ equipment
used in solar power plant
State Reference Description Concessional

rate
Maharashtra Schedule A Entry 56 -Solar power generating systems Nil
(Read with -Solar photovoltaic modules and panels,
Notification No. VAT- for water pumping and other
1509/CR-81- applications
B(1)/Taxation 1.-
Dated 29th June
2009)
Karnataka Notification No. No. Solar PV Panels Nil
FD 71 CSL 2015
Dated: 1st August,
2015
Jammu & Schedule C (Entry Solar energy equipment including solar Nil
Kashmir 40A) cookers, Solar Heaters, Solar Dyers,
Solar Lantern and Solar Street Lighting
Uttar Pradesh Schedule 1 (Entry 13) Solar Energy devices, Solar Energy Nil
equipment and parts thereof
Chhattisgarh Notification No. F- Solar energy equipment and Nil
10/15/2012/CT/V components [Exemption is available for
(20) Dated 31st the period from 01-04-2012 to 31-03-
March, 2012 2016]
Rajasthan Schedule I A) Solar energy equipment Nil
(Entry 107 & 135) B) Plant and Machinery including parts
thereof, used in generation of
Electricity, from- (a) Solar Energy
Analyzed below are the exemptions on various components for solar GRID as well as off-GID
projects.
6.1.1 Solar PV (GRID)
The following break-up for capital cost and O&M for a solar PV GRID project has been considered
Cost % Procurement Current GST Comments

category pattern assumed regime
Capital cost
PV Modules 54.86% Entirely imported No customs duty BCD exemption Removal of
is applicable as could continue. exemptions -
full exemption is However, there Increase in
available from would be cost
BCD, ACD as well additional IGST
as SAD (as of 20%
highlighted
above)
Land cost 4.13% On lease Service tax CGST and SGST Rate under
applicable at would be GST would be
14.5% applicable at higher than
20% current rate
Increase in
cost
Civil and 8.25% Only installation Service tax Inter-State Rate under
General services procured applicable at IGST GST would be
Works 50% within the 14.5% applicable at higher than
State and 50% from 20% current rate
outside the state Intra-State - Increase in
CGST and cost
SGST would
be
applicable at
20%
Mounting 8.25% Procured on inter- Excise duty IGST would be Removal of
structures State basis Exempt applicable at benefit
CST - 20%. Further, against
Applicable at additional tax at statutory
2% (against 1% would also forms would
Form C) be applicable increase tax
rate -
Increase in
cost
Power 7.43% Procured within Excise duty CGST and SGST Rate under
conditioning the State Exempt would be GST would be
unit VAT - applicable at higher than
Applicable at 20% current rate
concessional due to
rate provided removal of
by State (as exemptions/
highlighted concessions
above) Increase in
cost
Evacuation 9.08% Considered as
Excise duty - Inter-State Rate under
Cost up to goods Procured Exempt IGST GST would be
Inter- 50% from within CST applicable applicable at higher than
connection the State and 50% at 2% for 20% plus current rate
unit from outside the inter-State additional due to
State procurements tax of 1% removal of
VAT Intra-State - exemptions/
applicable at CGST and concessions
concessional SGST would Increase in
rate provided be cost
by State for applicable at
intra-State 20%
procurements
Preliminary 8.01% Considered as Service tax Inter-State Rate under
and Pre- services Procured applicable at IGST GST would be
operative 50% from within 14.5% applicable at higher than
expenses the State and 50% 20% current rate
including from outside the Intra-State - Increase in
IDC and State CGST and cost
contingency SGST would
be
applicable at
20%
Operation and maintenance
O&M 100% Assumed as works VAT - CGST and SGST Impact to be
contract from Applicable as would be analyzed
within the State per valuation applicable at based on
and rate 20% current rate
provided by applicable for
State each State
Service tax
Applicable at
14.5% on 70%
of the value
The State wise impact on the levelised tariff is summarized below3:
Solar PV Project
State Levelised Tariff Levelised Tariff % increase Impact
in current in GST regime
regime
(Rs. Per unit)
(Rs. Per unit)
Tamil Nadu 7.04 8.04 14.26%
Maharashtra 7.04 8.09 14.91%
Gujarat 7.04 8.04 14.17%
Rajasthan 7.04 8.13 15.51%
Andhra Pradesh 7.04 7.96 13.07%
3Please refer workings for detailed comments These have been provided based on workings provided in CERC orders,
assumptions and exemptions available currently
Telangana 7.04 7.96 13.07%
Madhya Pradesh 7.04 8.13 15.51%
Karnataka 7.04 7.95 12.90%
Punjab 7.04 7.96 13.05%
6.1.2 Solar off-GRID

The following break-up for capital cost and O&M for a solar off-GRID project has been considered:
Cost category % Procurement Current regime GST Comments

pattern assumed
Capital cost
Solar Panel 29.96% 80% imported and Import - No Import - BCD Removal of
20% procured customs duty is exemption exemptions
within the State applicable as would and increase
full exemption continue. in tax rate
is available However, would
from BCD, ACD there would increase costs
as well as SAD be additional
(as highlighted IGST of 20%
above)
Intra-State Intra-State
procurements procurements
Excise duty is CGST and
exempt. VAT is SGST would
applicable at be applicable
concessional at 20%
rate provided
by State (as
highlighted
above)
Battery 35.96% 30% imported and Import Import - BCD Removal of
70% procured Customs duty would exemptions/
within the State is applicable at continue to be concessions
5.15% (BCD of levied at and increase
5% and cess ) - concessional in tax rate
ACD and SAD rate of 5%. would
are exempt Further, there increase costs
would be
Intra-State additional
procurements IGST of 20%
Excise duty is
exempt. VAT is Intra-State
applicable at procurements
concessional CGST and
rate provided SGST would
by State (as be applicable
highlighted at 20%
above)
Power 18.73% 35% imported and Import Import - BCD Removal of
conducting 65% procured Customs duty would exemptions
pattern assumed
units within the State is applicable at continue to be and increase
5.15% (BCD of levied at in tax rate
5% and cess of concessional would
3%) ACD and rate of 5%. increase costs
cess are exempt Further, there
would be
Intra-State additional
procurements IGST of 20%
Excise duty is
exempt. VAT is Intra-State
applicable at procurements
concessional CGST and
rate provided SGST would
by State (as be applicable
highlighted at 20%
above)
Structure 4.49% Procured within the Excise duty CGST and SGST Rate under
State Exempt would be GST would be
VAT - applicable at higher than
concessional due to
above) Increase in
cost
Cable 2.25% Procured within the Excise duty CGST and SGST Rate under
State Exempt would be GST would be
VAT - applicable at higher than
concessional due to
above) Increase in
cost
Monitoring 1.12% 35% imported and Customs duty CGST and SGST Rate under
systems 65% procured 5.15% would be GST would be
within the State Excise duty applicable at higher than
Exempt 20% current rate
VAT - due to
Applicable at removal of
concessional exemptions/
rate provided concessions
by State (as Increase in
highlighted cost
above)
Installation 7.49% Considered as Service tax CGST and SGST Rate under
costs services Procured applicable at would be GST would be
within the State 14.5% applicable at higher than
20% current rate
Increase in
cost
Cost category %
Procurement Current regime GST Comments
pattern assumed
O&M 100% Assumed as works VAT - CGST and SGST Impact for
contract - within Applicable as would be each State to
the State per valuation applicable at be analyzed
and rate 20% based on
provided by current rate
State applicable for
Service tax each State
Applicable at
14.5% on 70%
of the value
The State wise impact on the capital cost and O&M cost is summarized below4:
Solar off-GRID projects

State Capital cost and Capital cost and % increase Impact
AMC charges n AMC charges in
current regime GST regime (in
(in Rs.) Rs.)
Tamil Nadu 14,38,577 16,77,461 16.61%
Maharashtra 14,04,915 16,77,461 19.40%
Gujarat 14,38,327 16,77,461 16.63%
Rajasthan 14,06,415 16,77,461 19.27%
Andhra Pradesh 14,35,252 16,77,461 16.88%
Telangana 14,35,252 16,77,461 16.88%
Madhya Pradesh 14,06,415 16,77,461 19.27%
Karnataka 14,33,881 16,77,461 16.99%
Punjab 14,42,636 16,77,461 16.28%
6.2 Wind energy - Impact
Various exemptions have been provided to the wind energy sector as measure to ensure its growth.
Provided below is a summary of exemptions which are provided currently to the wind energy sector
(in addition to the general exemptions mentioned above which are available for various renewable
(i) BCD
wind power plant:

heading rate
No. 12/2012- 335A 7326 90 Forged steel rings for manufacture of BCD - 5%
Customs, 99 special bearings for use in wind operated
dated 17 electricity generators
March 2012 362 84 or any The following goods, namely:- BCD - 5%
other (i)Wind operated electricity generators
Chapter upto 30 KW and wind operated battery
chargers upto 30 KW
(2) Parts of wind operated electricity
generators, for the manufacture or the
maintenance of wind operated electricity
generators, namely: (a) Special bearings,
(b) Gear box, (c) Yaw components, (d)
Wind turbine controllers, and (e) Parts of
the goods specified at (a) to (d)
(3) Blades for rotor of wind operated
electricity generators, for the manufacture
or the maintenance of wind operated
electricity generators
(4) Parts for the manufacture or the
maintenance of blades for rotor of wind
operated electricity generators
(5) Raw materials for the manufacture of -
(a) blades for rotor of wind operated
electricity generators, or (b) parts, sub-
parts of such blades
363 84 or any Permanent magnets for manufacture of BCD 5%

other PM synchronous generators above 500KW
Chapter for use in wind operated electricity
generators
(ii) SAD
The following specific exemptions/ concessions from SAD are available for goods/ equipment used in
wind power plant

heading rate
No. 21/2012- 14C Any Parts and raw materials required for use in Nil
Customs, Chapter the manufacture of wind-operated
dated 17 electricity generator
March 2012
(v) Excise duty
used in wind power plant

heading rate
12/2012- 327 32,38,39,44 Goods specified in List 9 (refer Nil

Excise dated or 70 notification), for the manufacture of rotor
17 March 2012 blades and intermediates, parts and sub-
parts of rotor blades, for wind operated
electricity generators
(vi) VAT/ CST
The following specific exemptions/ concessions from VAT/ CST are available for goods/ equipment
used in wind power plant
State Reference Description Concessional

rate
Rajasthan Schedule I Plant and Machinery including parts Nil
(Entry 135) thereof, used in generation of
Electricity, from- (a) Solar Energy;(b)
Wind Power: "
6.2.1 Wind GRID
Following break-up for levelised tariff for a Wind GRID project has been considered:
Cost % Procurement Current regime GST Comments

category pattern
assumed
Capital cost
Wind operated 69.14% 30% parts are Import - Import - BCD Removal of
electricity imported, 35% Customs duty is exemption exemptions
generator, its are procured applicable at could and increase
components within the State 5.15% (BCD of continue. in tax rate
and parts and 35% are 5% and 3% However, would
thereof procured on cess) - ACD and there would increase costs
including rotor inter-State basis SAD are be additional
and wind exempt IGST of 20%
turbine
controller Intra-State
procurements Intra-State
Excise duty is procurements
exempt. VAT is CGST and
applicable at SGST would
concessional be applicable
rate provided at 20%
by State (as
highlighted Inter-State
above) procurements
IGST would
Inter-State be applicable
procurements at 20% along
Excise duty is with
exempt. CST is additional tax
applicable at of 1%
2% against
Form C
Transformer 2.06% Procured within Excise duty is Intra-State Increase in

the State applicable at procurements tax rate would
12.5% CGST and SGST increase costs
would be
VAT is applicable applicable at
at concessional 20%
rate provided by
State (as
highlighted
above)
Transportation 5.15% 50% procured Service tax Inter-State Increase in
within the State applicable at IGST tax rate would
and 50% 4.35% (30% of applicable at increase costs
procured on 14.5%) 6% (30% of Further,
inter-State basis 20%) impact would
be there if
Intra-State - abatement is
CGST and SGST removed/
would be changed
applicable at 3%
each i.e. total
category pattern
assumed
6% (30% of
20%)
Services 23.66% 50% procured Service tax Inter-State Increase in
within the State applicable at IGST tax rate would
and 50% 14.5% applicable increase costs
procured on 20%
inter-State basis
Intra-State -
CGST and
SGST would
be
applicable
total 20%

O&M 100% Assumed as VAT - CGST and SGST Impact for
works contract - Applicable as would be each State to
from within the per valuation applicable at be analyzed
State and rate 20% based on
Applicable at
14.5% on 70%
of the value
Wind Projects
regime
(Rs. Per unit)
(Rs. Per unit)
Tamil Nadu 6.58 7.39 12.27%
Maharashtra 6.58 7.40 12.35%
Gujarat 6.58 7.39 12.19%
Rajasthan 6.58 7.51 14.12%
Telangana 6.58 7.33 11.28%
Madhya Pradesh 6.58 7.51 14.12%
Kerala 6.58 7.40 12.43%
6.2.2 Wind-Solar hybrid Off-GRID
The following breakup for capital cost and O&M for a Wind GRID project has been considered:

category pattern
assumed
Capital cost
Wind solar 86.50% Procured within Excise duty is CGST and SGST Removal of
hybrid system the state exempt. would be exemptions
applicable at and increase
VAT is applicable 20% in tax rate
at concessional would
rate provided by increase costs
State (as
highlighted
above)
Transportation 3.86% Assumed entirely Service tax CGST and SGST Increase in
services applicable at would be tax rate would
procured within 4.35% (30% of applicable at 3% increase costs
the State 14.5%) each i.e. total Further,
6% (30% of impact would
20%) be there if
abatement is
removed/
changed
Installation 9.64% Assumed entirely Service tax CGST and SGST Increase in
and services applicable at would be tax rate would
commissioning procured within 14.5% applicable at increase costs
at site the State total 20%

within the State per valuation applicable at be analyzed
Applicable at
14.5% on 70%
of the value
The State wise impact on the capital cost and O&M cost is summarized below6:
Wind-Solar hybrid off-GRID projects

State Capital cost and Capital cost and % increase Impact
AMC charges n AMC charges in
current regime GST regime (in
(in Rs.) Rs.)
Tamil Nadu 16,38,325 18,37,680 12.17%
Maharashtra 16,37,150 18,37,680 12.25%
Gujarat 16,39,500 18,37,680 12.09%
Rajasthan 15,74,030 18,37,680 16.75%
Andhra Pradesh 16,53,953 18,37,680 11.11%
Telangana 16,53,953 18,37,680 11.11%
Madhya Pradesh 15,74,030 18,37,680 16.75%
Punjab 16,35,975 18,37,680 12.33%
6.3 Bio mass energy - Impact
To boost the bio- energy industry, various exemptions have been provided by both Central as well as
State Government for setting up, operation as well as maintenance of solar energy sector.
Provided below are summary of exemptions which are provided currently to the bio-energy sector (in
addition to the general exemptions mentioned above which are available for various renewable
(i) BCD
biomass plant:

heading rate
No. 81/2005- NA Any All items of machinery, including prime BCD - 5%

Customs dated chapter movers, instruments, apparatus and ACD - Nil
8 September appliances, control gear and transmission
2005 equipment, and auxiliary equipment
for initial setting up of a project for
generation of power or generation of
compressed bio-gas (Bio-CNG) using non-
conventional materials, namely,
agricultural, forestry, agro-industrial,
industrial, municipal and urban waste, bio
waste or poultry litter
(ii) Excise duty
used in biomass plant

heading rate
33/2005- NA Any All items of machinery, including prime Nil

Excise dated 8 chapter movers, instruments, apparatus and
September appliances, control gear and transmission
2005 equipment, and auxiliary equipment
for initial setting up of a project for
generation of power or generation of
compressed bio-gas (Bio-CNG) using non-
conventional materials, namely,
agricultural, forestry, agro-industrial,
industrial, municipal and urban waste, bio
waste or poultry litter
6.3.1 Bio-mass GRID
The following breakup for levelised tariff for a Bio-mass GRID project has been considered:

category pattern
assumed
Capital cost
Land and site 2.42% These are Service tax is Inter-State Increase in
Development assumed as applicable at IGST would tax rate would
services 50% 14.5% be applicable increase costs
procured within at 20%
the State and
50% on inter-
State basis Intra-State
CGST and
SGST would
be applicable
at 20%
Civil works 3.58% Procured within Excise duty is CGST and SGST Tax
(Share of the State applicable at would be implication to
cement ) 12.5% applicable at be analyzed
20% based on rate
VAT is applicable of VAT on
typically at higher cement in
rate of each State each State
Civil works 2.69% Procured within Excise duty is CGST and SGST Increase in
(Share of steel the State applicable at would be tax rate would
structural ) 12.5% applicable at increase costs
20%
VAT is applicable
typically at lower
rate of each State
(Share of other the State applicable at would be implication to
goods - 12.5% applicable at be analyzed
20% based on rate
VAT is assumed of VAT in
typically at higher each State
rate of each State
Civil works 5.97% Procured within Service tax is CGST and SGST Increase in
(share of the State applicable at applicable at tax rate would
services) 14.5% 20% increase costs
Plant and 68.01% 30% parts are Import - Import - BCD Removal of
machinery imported, 35% Customs duty is exemption exemptions
are procured applicable at could and statutory
within the State 9.36% (BCD of continue. forms and
and 35% are 5% , cess of 3% However, increase in
procured on and SAD of 4%) there would tax rate would
inter-State basis ACD is be additional increase costs
exempt IGST of 20%
Intra-State
category pattern
assumed
by State (as
above) procurements
IGST would
Excise duty is with
applicable at of 1%
2% against
Form C
Miscellaneous 2.80% Procured within Excise duty is CGST and SGST Tax
fixed assets the State applicable at would be implication to
12.5% applicable at be analyzed
20% based on rate
rate of each State
Contingencies 11.84% These are Service tax is Inter-State Increase in

assumed as applicable at IGST would tax rate would
services 50% 14.5% be applicable increase costs
the State and
50% on inter- Intra-State
State basis CGST and
SGST would
be applicable
at 20%
each State
Service tax
Applicable at
14.5% on 70%
of the value
Biomass charges
Biomass 100% Procured within VAT applicable - CGST and SGST Increase in
(bagasse) the State depending kind of would be tax rate would
input used. applicable at increase costs
Assumed 20%
category pattern
assumed
(typically) at
lower rate in each
State
The State wise impact on the total COG as well as levelised tariff is summarized below7:
Bio Mass Projects Impact on Total COG

State Total COG in Total COG in % increase Impact
current regime GST regime
(Rs. Per unit) (Rs. Per unit)
Tamil Nadu 9.19 10.38 12.99%
Maharashtra 10.39 11.74 12.96%
Karnataka 9.76 10.89 11.62%
Punjab 10.56 11.77 11.44%
Uttar Pradesh 9.41 10.61 12.74%
Haryana 10.22 11.51 12.64%
Chhattisgarh 9.76 11.01 12.83%
Bio Mass Projects Impact on Applicable tariff (FY15-16)

State Current regime GST regime % increase Impact
(Rs. Per unit) (Rs. Per unit)
Tamil Nadu 7.45 8.40 12.68%
Maharashtra 8.34 9.39 12.63%
Karnataka 7.88 8.75 11.11%
Punjab 8.47 9.40 11.02%
Uttar Pradesh 7.62 8.56 12.38%
Haryana 8.21 9.22 12.30%
6.3.2 Bio-mass gasifier
The following breakup for levelised tariff for a bio-mass gasifier project has been considered:

pattern
assumed
Capital cost
Erection, 10% These are Service tax is Inter-State Increase in
Commissioning assumed as applicable at IGST would tax rate would
and training services 50% 14.5% be applicable increase costs
the State and 50%
on inter-State
basis Intra-State
CGST and
SGST would
be applicable
at 20%
Plant and 90% 30% are Import - Import - BCD Removal of
machinery imported, 35% Customs duty is exemption exemptions
are procured applicable at could and statutory
and 35% are 5% , cess of 3% However, increase in
procured on and SAD of 4%) there would tax rate would
inter-State basis ACD is be additional increase costs
exempt IGST of 20%
Intra-State
by State (as
above) procurements
IGST would
Excise duty is with
applicable at of 1%
2% against
Form C

each State
Service tax
pattern
assumed
Applicable at
14.5% on 70%
of the value
Biomass charges
Biomass 100% Procured within VAT is assumed CGST and SGST Increase in
(bagasse) the State typically at lower would be tax rate would
rate in each State applicable at increase costs
20%
The State wise impact on the total COG and levelised tariff is summarized below8:
Biomass Gasifier Projects- Impact of GST on Total COG (Rs/Unit)

State Current Regime GST Regime Change (%) Impact
Tamil Nadu 8.23 9.33 13%
Maharashtra 9.34 10.59 13%
Andhra Pradesh 8.33 9.36 12%
Karnataka 8.76 9.80 12%
Punjab 9.50 10.62 12%
Uttar Pradesh 8.43 9.55 13%
Haryana 9.18 10.37 13%
Chhattisgarh 8.76 9.92 13%
Bio Mass Gasifier Projects Impact on Applicable Tariff (FY15-16)

State Current regime GST regime % increase Impact
(Rs. Per unit)
(Rs. Per unit)
Tamil Nadu 6.59 7.46 13.26%
Maharashtra 7.40 8.37 13.18%
Karnataka 6.98 7.78 11.52%
Punjab 7.52 8.37 11.40%
Uttar Pradesh 6.74 7.61 12.91%
Haryana 7.28 8.21 12.78%
6.4 Small hydro project - Impact
Provided below is summary of exemptions which are provided currently to the small hydro power
plants sector (in addition to the general exemptions mentioned above which are available for various
renewable energy sectors which have been discussed earlier).
(i) VAT/ CST
State Reference Description

Concessional
rate
Maharashtra Schedule C Transformers and components and 5%
(Entry 53 & 97) parts thereof and Industrial cables
(High voltage cables, plastic coated
cables, jelly filled cables, optical fibre
cable
Himachal Schedule A Part IA Plant and machinery when sold to 2%
Pradesh (Entry 2) hydro-power units for use in generation
of hydro-power subject to furnishing of
a certificate in duplicate by the
registered hydro-power unit to the
registered selling dealer in the following
Form 'HD
6.4.1 Small Hydro GRID projects

The following break-up for levelised tariff for a Small Hydro GRID project has been considered:

category pattern
assumed
Capital cost
(Share of the State applicable at would be implication to
cement ) 12.5% applicable at be analyzed
20% based on rate
VAT is applicable of VAT on
typically at higher cement in
rate of each State each State
Civil works 8.82% Procured within Excise duty is CGST and SGST Increase in
(Share of steel the State applicable at would be tax rate would
structural ) 12.5% applicable at increase costs
20%
VAT is applicable
typically at lower
rate of each State
(Share of other the State applicable at would be implication to
goods - 12.5% applicable at be analyzed
20% based on rate
rate of each State
category pattern
assumed
Civil works 19.60 Procured within Service tax is CGST and SGST Increase in
(share of % the State applicable at would be tax rate would
services) 14.5% applicable at increase costs
20%
Electrical 29% 27% parts are Import - Import - BCD Removal of
(turbine and imported, 36.5% Customs duty is concession exemptions
generator) are procured applicable at could and statutory
and 36.5% are 5%, ACD of However, increase in
procured on 12.5%, cess of there would tax rate would
inter-State basis 3% and SAD of be additional increase costs
4%) IGST of 20%
Intra-State
applicable at CGST and
5%. VAT is SGST would
applicable at be applicable
concessional at 20%
rate provided
by State (as Inter-State
highlighted procurements
above) IGST would
be applicable
Inter-State at 20% along
procurements with
Excise duty is additional tax
applicable at of 1%
12.5%. CST is
applicable at
2% against
Form C
T&D (cables 4.8% 50% procured Intra-State Intra-State Removal of

and within the State procurements procurements exemptions
transformers) and 50% Excise duty is CGST and and statutory
procured on applicable at SGST would forms and
inter-State basis 5%. VAT is be applicable increase in
applicable at at 20% tax rate would
concessional increase costs
rate provided Inter-State
by State (as procurements
highlighted IGST would
above) be applicable
at 20% along
Inter-State with
procurements additional tax
Excise duty is of 1%
applicable at
12.5%. CST is
applicable at
2% against
category pattern
assumed
Form C
Land, 17.2% Assumed as Increase in

administrative, services - 50% Service tax tax rate would
miscellaneous procured within applicable at Inter-State lead to an
charges, the State and 50% 14.5% IGST increase in
procured on applicable costs
inter-State basis 20%
Intra-State -
CGST and
SGST would
be
applicable
total 20%
each State
Service tax
Applicable at
14.5% on 70%
of the value
Small Hydro Projects

regime
(Rs. Per unit)
(Rs. Per unit)
Tamil Nadu 5.47 6.07 11.11%
Maharashtra 5.47 6.07 11.04%
Arunachal Pradesh 4.64 4.68 0.80%
Karnataka 5.47 5.92 8.35%
Sikkim 4.64 4.79 3.16%
Himachal Pradesh 4.64 4.75 2.44%
Uttarakhand 4.64 4.86 4.63%
6.5 Bio-fuel sector - Impact
Bio-fuel is an upcoming source of renewable
energy in India. Biofuels are produced through
contemporary biological processes, such as
Ethanol
agriculture and anaerobic digestion, rather
than a fuel produced by geological processes
(such as coal or petroleum).
Unlike other sources of renewable energy

where the end product if electricity, bio-fuel
sector is engaged in production of bio-fuel
Bio Types of bio
itself. Such bio-fuel is supplied to OMCs, diesel fuels
Government and State bodies including
railways as well as in bulk to various industrial
players.
The different types of bio fuels are ethanol, bio

diesel and bio ethanol.
Bio
The implications on the same have been ethanol
discussed below.
6.5.1 Ethanol
The primary input for ethanol is molasses (which is obtained as residue of the sugar industry). The
ethanol produced from such molasses is supplied typically to the OMCs for blending in petrol.
The following exemptions have been provided under central excise to molasses as well as ethanol:

heading rate
12/2012- 17 1703 Molasses (Other than produced in the Nil

Excise dated manufacture of sugar by the vacuum pan
17 March 2012 process), for use in the manufacture of
goods other than alcohol
40 2207 20 All spirits (other than denatured ethyl Nil
00 alcohol of any strength)1
40A Ethanol produced from molasses Nil
generated from cane crushed in the sugar
season 2015-16 ie. 1 October 2015
onwards, for supply to the public sector oil
marketing companies, namely IOCL,
HPCL, BPCL for the purposes of blending
with petrol
Hence, no excise duty is levied on molasses supplied to the ethanol producers as well as ethanol
produced for supply to OMCs.
Provided below is comparison between current rates on molasses and ethanol and proposed rate
under GST:
Molasses Impact on rate
State Current regime GST rate Impact
Excise duty VAT
Karnataka Nil 20% 20%
Maharashtra Nil 20% 20%
Punjab Nil 14.30% 20%
Tamil Nadu Nil 30% 20%
Uttar Pradesh Nil 14.5% 20%
Ethanol Impact on rate

Excise duty VAT
Karnataka Nil 20% 20%
Tamil Nadu Nil 14.5% 20%
Uttar Pradesh Nil 14.5% 20%
6.5.2 Bio-diesel
The primary input for bio-diesel are palm fatty acids, palm stearin , edible oil seeds etc (the main
input is palm stearin.) The bio-diesel produced is supplied typically to the OMCs for blending in high
speed diesel. Bio-diesel may also be separately supplied to other customers (such as railways or
industrial units when sold in bulk).
The following exemptions have been provided under central excise to molasses as well as ethanol:

heading rate
Excise Tariff Chapter 29 Alkyl esters of long chain fatty acids Nil
or 38 obtained from vegetable oils, commonly
known as bio-diesels
12/2012- 113A 3823 11 12 The following goods for use in the Nil (upto 31
Excise dated manufacture of alkyl esters of long chain March 2016)
17 March 2012 fatty acids obtained from vegetable oils,
commonly known as bio-diesels, namely:-
(i) RBD Palm Stearin
(ii) Methanol
(iii) Sodium Methoxide
This exemption was granted from 19

October 2015 onwards
heading rate
76 2710 High speed diesel oil blended with alkyl Nil

esters of long chain fatty acids obtained
from vegetable oils, commonly known as
bio-diesels, up to 20% by volume, that is, a
blend, consisting 80% or more of high
speed diesel oil, on which the appropriate
duties of excise have been paid and, up to
20% bio-diesel on which the appropriate
duties of excise have been paid.
Hence, no excise duty is levied on palm stearin supplied to the bio-diesel producers as well as bio-
diesel produced. Further, no excise duty is also levied on high speed diesel which has 20% blend by
volume of bio-diesel.
Provided below is comparison between current rates on molasses and ethanol and proposed rate
under GST:
Palm Stearin Impact on rate

Excise duty VAT
Karnataka Nil 5.5% 20%
Tamil Nadu Nil 5% 20%
Uttar Pradesh Nil 5% 20%
Bio-diesel Impact on rate

Excise duty VAT
Karnataka Nil 5.5% 20%
Maharashtra Nil 12.5% 20%
Tamil Nadu Nil 14.5% 20%
Uttar Pradesh Nil Nil 20%
6.5.3 Bio-ethanol
The primary input for bio-ethanol is bio-mass. This is a comparatively new field and currently there
are no bio-ethanol plants in India.
6.5.4 Impact of GST on bio-fuel sector
For all the aforementioned bio-fuel sources, the key impact of GST would be as under:
Increase in cost of procurements for biofuel The cost of procurements of inputs used in
production of bio-fuel would increase due to the following reasons:
- Since GST aims at pruning of exemptions to continue the credit chain, the exemptions
produced to various inputs of the bio-fuel sector (such as excise exemptions to molasses,
palm stearin etc) may be done away with. In such case, there may be an increase in the
rate of tax paid on inputs which would have a cash flow impact. However, such taxes paid
on input should be available as credit to the bio-fuel producer
- Removal of statutory forms Procurement against Form C (at 2%) may be removed. Since
Form C would be removed as well as exemptions removed, the cost of procurements may
go up leading to higher working capital requirements
- Increase in rate Possible increase in rate under GST as compared to the current VAT
rate leading to higher cost of procurements
Increase in taxes on bio-fuel Currently, excise exemption provided to ethanol as well as bio-
diesel. Such exemptions may be pruned leading to higher cost and increase in prices of
ethanol/ bio-diesel. Further, there may also be an increase in the rate of tax on bio-fuels under
GST as compared to current VAT rates leading to higher tax burden
No credit available for OMCs OMCs which produce petrol/ diesel etc would be outside GST
unless otherwise notified. Hence, the GST charged on ethanol/ bio-diesel would not be
available as credit to OMCs and would become a cost. Further, the cost would increase
substantially due to removal of exemptions and statutory forms as well as increase in rate of
tax. Hence, any GST charged by the bio-fuel producers would become a cost to the OMCs
OMCs may seek to reduce the consumption of such bio-fuels which would go against the
objective of the Government to produce this sector
5. Key issues and recommendations
Per the aforesaid analysis, it is evident that the cost of renewable energy would increase under the
GST regime. Analyzed below are the key factors under GST which lead to a potential negative impact
for the renewable energy sector and recommendations for the same.
7.1.1 Key factors for negative impact under GST

(i) Increase in tax costs due to removal of exemptions
Current regime
Electricity generated by renewable energy sources is generally exempt from electricity duty in most of
the States10.
However, various taxes are levied on procurement of goods and services (on both capital
procurements as well as O&M charges). The taxes paid against such procurements become a cost as
there is no output liability (and in any case such taxes cannot be utilized against electricity duty).
The Government has always strived to promote the renewable energy sector and accordingly, various
exemptions have been provided to the sector. A few of these include:
Customs duty exemptions/ concessions on import of goods required to be used in specified

renewable energy sector. Few examples include:
- Concessional rate of BCD of 5% is provided to import of all goods used for Project Imports
- Solar - Exemption from BCD on solar panels, cells and modules. Also, exemption from
ACD and SAD provided to all items of machinery, transmission equipment, auxiliary
equipment etc used for setting up of solar power plant. Further, import of various other
solar components has been exempt or provided concessional rate
- Wind Concessional rate of BCD of 5% and exemption from ACD and SAD provided to
import of various components used by a wind power plant (such as wind operated
electricity generators, wind turbine controllers etc)
- Small Hydro No specific exemption for small hydro projects
- Bio Mass Concessional rate of BCD of 5% and exemption from ACD provided to all
items of machinery, auxiliary equipment etc for setting up a project for generation of
power or generation of compressed bio-gas
Excise duty exemptions/ concessional rates on production of renewable energy as well as

procurement of goods to be used in production of renewable energy. Few examples include:
- Solar Excise duty exemption provided to all items of machinery, transmission

equipment, auxiliary equipment etc used for setting up of solar power plant
- Wind Excise duty exemption provided to specified goods/ parts used for manufacture on
products which may be used in a wind operated power plant
- Small Hydro- No specific exemption for small hydro projects
10 Few States such as Maharashtra have recently imposed electricity duty on electricity generated through renewable energy
- Bio Mass- Exemption from excise duty provided to all items of machinery, auxiliary
equipment etc for setting up a project for generation of power or generation of compressed
bio-gas using non-conventional materials, namely, agricultural, forestry, agro-industrial,
industrial, municipal and urban waste, bio waste or poultry litter
- Bio-fuel Excise exemptions provided to bio-fuels (ethanol as well as bio-diesel) as well as

its key inputs (such as molasses and palm stearin)
Exemption/ concessional rate have been provided under various State VAT legislations on
sale of goods to be used for generation of renewable energy. For example:
- Tamil Nadu Concessional rate of VAT of 5% available to renewable energy devices and
spare parts other than few specified goods
- Gujarat - Concessional rate of VAT of 5% available to renewable energy devices and
components and parts thereof
- Rajasthan Exemption provided to solar energy equipment and plant and Machinery
including parts thereof, used in generation of Electricity, from- (a) Solar Energy;(b) Wind
Power
- Further, lower rate of VAT has also been provided on various inputs for bio-fuel sector in
few States
Various other exemptions/ concessions under both State as well as Central Indirect Tax
legislations exemptions under Entry tax law, incentives under State industrial policy etc
The above tax exemptions/ concessions help in reducing the procurement cost incurred for setting
up/ operating a renewable energy project.
GST regime
GST is based on the foundation of providing a one tax regime, seamless credit chain (through cross
utilization of credits inter se goods and services) and reduction of exemptions. However, electricity is
expected to continue to be an exempted product under GST regime. Considering the same, for
renewable energy projects, the GST paid on inputs, capital goods and services would continue to be a
cost. Therefore, if exemptions/ concessional rates are pruned under the GST regime, there would be a
substantial increase in the cost of procurements.
Since electricity duty would be outside GST, the GST paid on such procurements would continue to
be a cost and would have an adverse impact on the cost of renewable energy. Similarly, taxes charged
on bio-fuel would become a cost to OMCs (as they would be outside GST).
Further, it is imperative to note that the adverse impact of tax cost would vary from project to project
(as well as from one source of renewable energy to another) based on the procurement pattern
(import vs. domestic purchase) as well as extent of exemptions available currently (For eg Solar has
more exemptions currently than Small Hydro plants. Hence, impact on Solar would be more adverse
that on Small Hydro plants).
For the purpose of computation, it has been assumed that all exemptions available currently would be
removed and the BCD rate would continue to remain as in current regime (whether concessional or
otherwise).
(ii) Increase in tax rates
Current regime
Currently, different tax rates are applicable depending on the nature of procurement. For example,
generic Excise duty rate is 12.5%, Service tax is 14.5% and VAT is 5%-14%. All such rates could be
reduced/ exempted basis the actual nature of goods and purpose.
GST regime
GST aims to provide a single rate for goods and services. The Select Committee has recommended
that the standard GST rate should not exceed 20%. For the purpose of computation, it has been
assumed a CGST rate of 10%, SGST rate of 10% and IGST rate of 20% (for inter-State transactions).
Further, an additional tax 1% may be levied for 2 years on inter-State sales/ purchases.
A GST rate of 20% would also be substantially higher than the rates applicable currently on
procurement of goods and services in the renewable energy sector. For example:
- Concessional rates (both excise duty as well as VAT) are available on procurement of goods
within India. GST rate of 20% would be substantially higher than the taxes which are paid on
domestic procurement of goods currently
- Service tax is paid at 14.5% currently while GST would be applicable at 20%. This clearly
shows a significant increase in tax costs which would be paid on procurement of services such
as installation, transportation etc
- Operation and Maintenance Both VAT and service tax is applicable currently on operation
and maintenance activities. However, concessional rate and valuation provisions are provided
for under VAT as well as Service tax laws. Accordingly, the effective tax generally is lower
than the proposed GST rate of 20%
Hence, an increase in tax rate11 would have an adverse impact on the taxes which would be paid on
procurements as the same would increase the tax cost burden for the renewable energy sector.
(iii) Removal of statutory forms
Current regime
Currently, inter-State procurements are liable to CST. A concessional rate of CST of 2% is provided
against issuance of statutory form (Form C) in case the goods are to be used in generation or
distribution of electricity.
Hence, the tax cost on account of CST is limited to 2% in case of inter-State procurements for
renewable energy projects.
GST regime
It is expected that statutory forms would be done away with in the GST regime. Hence, concessional
rate of tax would not be available even if the goods are to be used in generation of distribution of
electricity.
In such case, IGST at 20% would be applicable on inter-State procurements along with an additional
tax of 1%. This showcases a substantial increase in tax costs as compared to the current regime which
would directly impact the cost of renewable energy.
11Please note that tax impact for vendor selling to a renewable energy developer would also need to be analyzed and his
costs may increase/ decrease based on rate of tax under GST and credit fungibility
7.1.2 Key recommendations
The Government has always strived to boost the renewable energy sector. This is also evident from
the current Government policies and initiatives.
Current tax concessions play an important role to make renewable energy competitive.
Under GST, increase in tax cost for renewable energy sector could not only have a possible negative
impact on cost of setting-up renewable energy plants but also increase the working capital
requirements for the renewable energy sector leading to higher financial as well as operating costs.
Further, the renewable energy sector benefits every strata of the society (including various rural
areas) and hence, any increase in tax costs would also have an adverse social impact.
In line with the endeavour of the Government to promote the renewable energy sector and to ensure
that there is not a substantial increase in the delivered cost of renewable energy, the following
recommendations may be taken into account:
For renewable energy sector
- Current tax exemptions provided to the renewable energy sector should be continued under the
GST regime as well. In addition even the services rendered to a project owner for setting up and
operation of renewable energy plant/ project should be exempt from levy of GST. This would
ensure that there is no adverse impact on the procurements made for generation of renewable
energy due to increase in tax costs
- Exemptions should be provided for all categories of goods supplied to a renewable energy project
(whether meant used in setting up or are parts/ components of the plant or are used for O&M). If
exemption is provided HSN classification wise, detailed HSN classification should be provided, to
eliminate ambiguity.
- Sale of goods and services to renewable energy projects should be zero-rated, ie the vendors
providing such goods and services at nil GST rate should be eligible to avail credit of the GST paid
on inputs, capital goods and services used.
- Wherever, exemptions are not available, concessional rate of GST (both at Central and State level)
should be applicable on goods and services used by renewable energy sector
- Currently, the VAT rate in respect of renewable energy sector vary from state to state. It is
recommended that the SGST rate on such goods should be uniform across states under GST
regime
- Currently, a lot of ancillary products (such as battery, transformers) meant for renewable energy
projects are liable to taxes at normal rates. Under GST, it is recommended that all the goods used
for setting up or operating a renewable energy project should be eligible for relevant exemptions.
- The project developer should be eligible to claim refund of GST paid (both at Central and State
level) on goods and services used for setting up and operating renewable energy project.
For bio-fuel sector
- Exemptions provided to goods used in bio-fuel production as well as on bio-diesel itself should
continue and be zero rated
- Wherever, exemption is not granted, a concessional rate of GST should be applicable on both
goods and services used in bio-fuel sector as well as on bio-diesel itself
- OMC should be eligible to take refund of taxes paid on bio-fuel considering that petrol/ diesel
would be outside GST
- Refund of unutilized credits should be available to bio-fuel manufacturers in case of inverted duty
structure
Scope limitations
6. Scope limitations
This report only provides the impact on various renewable energy sectors.
Comments are based upon the assumptions stated in the report, CERC orders, discussions with
MNRE officials and industry players, existing drafts available in the public domain and various
discussions.
Only those renewable energy projects have been covered as mentioned above for which reliable
information could be gathered.

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Implications of GST on

delivered cost of renewable

Ministry of New and Renewable

Positive Impact Signifies positive impact under

Negative Impact Signifies negative impact under

Neutral Signifies no substantial change

Source of renewable % range of increase in Levelised Tariff/ cost Impact

S.No. Key factor Comments

The foundation of GST is based on pruning of exemptions as

Hence, if exemptions are pruned for goods used in renewable

A GST rate of 20% would also be substantially higher than

This would have an adverse impact as the taxes paid on

GST is expected to be levied on all inter-State supplies, with

IGST at 20% would be applicable on inter-State

Exemptions provided to goods used in renewable energy

Wherever, exemption is not granted, a concessional rate of

The renewable energy developer/ operator should be eligible

Uniform SGST rate across States on captial goods, inputs

Particulars Taxing authority Applicable on General effective rate

Service tax Central Government Provision of services Generic rate is 14.5%

Research & Central Government Import of technology into 5%

On import of goods - BCD and IGST

On import of services - IGST

Constitutional Amendment Process for

Bill referred to Select Committee of Rajya Sabha and report

GST Bill Process for

CGST levied by the Central Government

Taxes be subsumed Taxes kept outside of GST

Central levies BCD

SGST 10% (uniform across all states )

RNR has been computed at 15 - 15.5%

Works contract transactions to be classified as services (whether classified as goods or service,

CERC order dated 31 March

CERC order dated 31 March

CERC order dated 31 March

Total COG and CERC order dated 31 March

Capital Cost: One time cost for setting-up of the project;

Apportion value of each component according to assumed source of procurement (imported,

S.No Cost category Share in Source of procurement (Assumed)

3 Transportation 5% - 50% 50%

S.No Cost category Share in Source of procurement (Assumed)

2 Land cost (Assumed as 4% - 100% -

Small Hydro Projects

S.No Cost category Share in Source of procurement (Basis

Import Within- Inter-state

5 Electrical- Turbine and 29% 27% 36.5% 36.5%

S.No Cost category Share in Source of procurement (Assumed)

3 Civil- (Steel structural) 2.69% - 100% -

4 Civil- (Others goods) 2.69% - 100% -

5 Civil- Services 5.97% - 100% -

6 Plant and machinery- 68.01% 30% 35% 35%

(*Source: Indian Renewable Energy Department Agency Limited and MNRE)

Biomass Gasifier Projects

S.No Cost category Share in Source of procurement (Assumed)

[*Source: Information received from Industry players]

Wind Solar Hybrid Projects

S.No Cost category Share in Source of procurement (Assumed)

[*Source: Information received from Industry players and developers]

Solar Off-grid Projects

S.No Cost category Share in Source of procurement (Assumed)

2 Battery (Goods) 36% 30% 70% -

3 Power conditioning unit 19% 35% 65% -

5 Cable (Goods) 2% - 100% -